Lundvall1

Interactive learning perspectives on
innovation
Bengt-Åke Lundvall
Aalborg University
NORSI Lecture
October 24 2012
Kristiansand
My background
• Professor in Economics, Aalborg University, Denmark.
• Have worked on innovation and industrial development since
the end of the 1970s.
• Developed, together with Chris Freeman, the concept
’National System of Innovation’ in the first half of the 1980s.
• Initiated Globelics network 2000 with more focus on
developing countries (see www.globelics.org).
• March 2012 my Anniversary Symposium in Aalborg gave my
reason to reflect on what I have learnt.
Theme for Today is a follow up to this symposium where I
argued that:
• ‘Innovation as an interactive process’ constitutes a theoretical
core of innovation studies.
Summing up the lecture
1.
Innovation as an interactive process is at the theoretical
core of innovation studies!
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2.
Limits of standard economics
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3.
Origin: The theoretical divide between science-push and
demand pull: Schumpeter versus Schmookler:
On the important role of ‘paradigmatic cases’ in innovation
studies. The role of respectively the Sappho-study and the
Mike-project.
Dimensions of interaction within and across organisational
borders.
Innovation as an interactive process as reflected in the most
cited works in innovation studies.
the assumption of pure market.
the reduction of work to employment.
Toward a more general theory of innovation as an
interactive process and implications for future research.
Innovation studies: Challenging the
boundaries
• The entrepreneurship studies core according to Shane (2000) :
the key building blocks are respectively the individual and the
opportunities that he/she faces. The process of
entrepreneurship is one where individuals perceive, assess and
act in relation to opportunities.
• The innovation studies core (bal): innovation as an interactive
process. The innovation process is one where individuals or
organisations interact engaging in information exchange,
problem solving and mutual learning . In this process they
establish ‘relationships’ that may be seen as constituting
‘innovation systems’.
Schumpeter’s supply side bias
• Schumpeter had focus on supply side
• First defining the individual entrepreneur as the
most important driver of innovation – In Theory of
Economic Development – often referred to as
Schumpeter Mark I.
• Second defining the big oligopolist coporations
and their R&D-department as the most important
driver of innovation – often referred to as
Schumpeter Mark II.
• Schumpeter assumed that users and consumers
would accept and use new processes and
products. But he did not give them any active
role. Heneglected the demand side.
Schmookler’s challenge – on the
importance of the demand side
• Jacob Schmookler explored statistically the economics of
technological innovation at a detailed industry level. He
crystallized the notion of endogenous technological change
and its influence on economic growth two decades before the
concept was reinvented by macro economists.
• Through analysis of time series and cross-sectional patent
data and historical case studies, Schmookler demonstrated
that demand-pull influences were also important: the more
intense the demand, the more creative groups and individuals
were drawn to work on an unsolved problem and the more
patentable inventions they generated (Schmookler 1966 and
1972)
Christopher Freeman: The father of
modern innovation theory
• Economist from Cambridge – went to Keynes’
lectures, read Marx and Schumpeter.
• Among Freeman’s favourite themes beginning of
the 80’s were:
• The need to overcome the split between innovation
as driven by supply factors versus innovation as
driven by demand factors.
• The importance of understanding interaction
between agents in the innovation process.
• Collaboration with Freeman in the beginning of the
1980s inspired the Mike project – see below.
In innovation studies theories reflect
experiences from ‘paradigmatic cases’ –
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Schumpeter on Railways
Freeman on Chemical industry and the Sappho-study
Rosenberg on textiles and textile machinery
Dosi on semiconductor industry
• Major historical and empirical projects are important sources
for theory building in innovation studies.
• Theory is grounded. Innovation phenomenon is seen as
context specific and therefore the outcome is history friendly
modelling rather than general theory.
Sappho-project 1972 was important in opening up
for the insight that innovation is an interactive
process (cf. Chesbrough on Open Innovation)
The Sappho-project was organised at Science Policy
Research Unit at Sussex university by Freeman,
Rothwell and others. On the basis of pair-wise analysis
of successful and unsuccessful innovations it was
shown that firms that introduced successful in
innovation:
1. Interact more closely with customers, suppliers
and knowledge institutions (interorganisational
interaction).
2. Are characterised by closer interaction across
departments within the firm (intraorganisational
interaction).
The Mike project 1980-83 another crucial
experience and paradigmatic case
A project on the socio-economic impact of microelectronics. Our Method: Studying the development,
diffusion and use of technology in ‘industrial complexes’.
• Confirmed the importance of interactive learning
involving users and producers.
• But we also found that the ‘quality’ of the relationship
was as important as the strength.
• Strong and close relationships may hamper innovation
or give rise to ‘unsatisfactory innovation’. The problem
of lock in and weak user competence.
• Industrial complex as more than a cluster – cf. Military
industrial complex or for Financial Industrial complex
with political power.
Product innovation and User-producer
interaction - follow up to Mike-project
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Product innovation - the informational paradox
– on the information needs of Producers and
Users
Product innovation neither in neoclassical pure
markets nor in transaction economics markets
(Williamson 1975)
The organised market as solution
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Learning to communicate ( investing in codes and
channels)
Building trust and patterns of dominance
The product innovation paradox –
confrontation with transaction economics
 Market where product innovations appear
would be characterized by extreme uncertainty
(uncertainty regarding the commodity itself).
 This would according to transaction cost theory
(Oliver Williamson) imply high transaction costs
and result in vertical integration.
Again we would expect little product innovation.
This is in contrast with reality - more than 50% of
innovations are product innovations (addressed
to external users).
Why prefer the organised market to the
hierarchy?
• The producer who integrates with one specific user
excludes himself from access to information and
interactive learning with the other users – lock in.
• The user who integrates with one specific producer
excludes himself from access to information and
interactive learning with the other producers –lock in.
• Opportunism is not the general rule – it may flourish in
some contexts but not in others.
• To analyse vertical integration you have to include
benefits from interactive learning on line with
transaction costs. Is learning a transaction?
What is going on in the interaction
between users and producers?
• Analysis primarily referring to professional users – in
consumer markets producers dominate the interaction
and needs are fuzzy for the observer.
• Producers monitoring the users in terms of their
processes and products
• Producers involved in the implementation of new
products with feed back – learning from it
• Users monitoring the new technological opportunities
among producers
• Users draw upon producers when installing the new
product – learning from problem solving
Unsatisfactory innovations
• Unsatisfactory innovations are innovations that do not
respond to the needs of the users and that do not
exploit technological opportunities. They are typically
reflecting trajectories that are taken too far.
• Unsatisfactory innovations appears when user or
producers dominate and when innovations are
systemic.
• Unsatisfactory innovations may reflect missing or
obsolete relationships in the context of technological
revolutions.
Locational issues
• The role of Distance
• Geographical
• Cultural
• Depends on:
• Technology life cycles
• Paradigmatic shift
• Mature technologies
• Distinction between the kind of
knowledge exchanged in the interaction
– tacit versus explicit
Units of analysis
• From industries to verticals of production and
industrial clusters (cf. Porter)
• International competition between verticals
of production and between national
production systems
• Industrial complexes (clusters) as elements
of strength and weakness in national
systems of production.
• Clusters are not harmonious families of
firms – there power struggles within and
shared power in relation to society.
Innovation Process within the firm
 Innovation needs to draw upon new knowledge
(from R&D-department)
 Innovation needs to match the needs of production
(involves the production department).
 Innovation needs to match the characteristics of
new products (involves the marketing department)
 Horizontal interaction across the borders of
departments is crucial for the success of innovation.
 This is why learning organisations are more
innovative.
In house interaction and Learning
organisations
• Are more flat and allow horizontal
communication inside and outside the
organisational borders
• Establish cross-departmental and crossfunctional teams and promote job-circulation
between functions.
• Delegate responsibility to workers and invest in
their skills
• Establish closer co-operation with suppliers,
customers and knowledge institutions.
Conclusions of the first part
• The attack on standard economics and
transaction cost theory for their neglect of
product innovation. Positive sum game.
• UP-perspective could be applied to intra-firm
relationship!
• But also critical lessons for cluster analysis from
the industrial complex perspective –
• Lock in, imbalanced power and capability and
unsatisfactory innovation
• Cluster as collective political factor
The core literature 1990-2009 – all the five most cited works in
Handbooks on innovation – are about innovation as interactive
proces and about innovation systems.
Nelson, R. (1993): National Innovation
Systems: A Comparative Study
Porter, M. (1990):The Competitive Advantage
of Nations
Lundvall, B.-Å. (1992): National Systems of
Innovation
Cohen, W. and D. Levinthal (1990):Absorptive
capacity: A new perspective on learning and
innovation
Saxenian, A. (1994): Regional Advantage
The Modern understanding of the Innovation
Process
• Most innovations are outcomes of combinations
of diverse elements of knowledge.
• Such outcomes reflect interaction among agents
with different insights and skills.
• Interaction is social and reflects formal and
informal institutions.
• The economy is organised and constituted by
social relationships – not just a set of pure
markets!
Evolutionary socio-economics vs Standard
economics – a double change of focus
Allocation of
given use
values
Rational choice Standard
by
economics
homogenous
agents
Learning
among diverse
agents
Innovation:
Creation of
new use values
Evolutionary
economics
Adam Smith on Innovation and
Specialisation in Science
• Many improvements have been made by ….
those who are called philosophers or men of
speculation … who …are often capable of
combining together the powers of the most
distant and dissimilar objects.
• In the progress of society, philosophy or
speculation becomes, like every other
employment…. subdivided into a great number
of different branches, each of which affords
occupation to a peculiar tribe or class of
philosophers; (Adam Smith 1776: p. 9) :
Toward a general Theory of Innovation
’Dynamizing Adam Smith’
• Innovation are new combinations: they combine diverse
(distant!) elements of knowledge and innovation thrives
when people with different background meet and
interact.
• Innovation drives and shapes the division of labour. The
evolution of the division of labour contributes to
diversity and opens up new interfaces for interaction.
But Smith forgot to tell that the formation of ’tribes’
establish communication problems. (Compare for the
barriers between innovation studies, entrepreneurship
studies and STS-studies)
• Short social distance and low cultural barriers facilitate
interactive learning and promote innovation. Tolerant
environments are good for innovation (cf. Florida).
Innovations as outcomes of interaction between
’disparate actors’
• Innovations are new combinations of existing knowledge
elements and these new combinations originate from
interaction among individuals and organisations with different
kinds of knowledge.
• Growing specialisation increases the degree of knowledge
diversity and it increates the potential for new combinations.
• But there are barriers between:
• Disciplines
• Professions
• Functional departments
• Nation states
Some implications for future research
• One of my conclusions from studying this field is that there is
no meaningful ’pure’ economics of innovation!
• This follows from the fact that the learning processes that are
at the very core of innovation are interactive and therefore
will be affected by the existing social relationships.
• This implies that a neglect of the social dimension in
innovation studies will give misleading insights also in what
works at the national and enterprise level.
• We need much more systematic empirical research and
theoretical work on interaction and relationships:
• Knowledge taxonomies
• Technology taxonomies
• Indicators
• THANK YOU FOR YOUR
ATTENTION